Japan’s Inflation Declines

Japan’s consumer prices fell for a second month in April, adding to signs that the recession will herald a return to deflation.

Consumer prices excluding fresh food declined 0.1 percent from a year earlier, the same pace as March, the statistics bureau said today in Tokyo.

Bank of Japan Governor Masaaki Shirakawa said this week that price declines will accelerate through the middle of the year ending March 2010 as demand slackens and crude oil continues to trade lower than last year’s record. Retailers including Nitori Co. and Daiei Inc. are cutting prices to entice cash-strapped consumers to spend more.

Consumers may delay purchases if they expect goods to get cheaper, eroding corporate profits and forcing firms to cut wages. Japan only emerged from a decade of deflation when prices started to rise in 2005.

Core prices in Tokyo, the nation’s capital, fell 0.7 percent in May from a year earlier, the biggest drop in six years, according to the report. It was the first decline since September 2007.

Wholesale inflation, or the costs companies pay for goods and fuel, tumbled at the fastest pace in 22 years in April, and prices they pay for services declined for a seventh month.

Japan’s Inflation Declines

TradingEconomics.com, Bloomberg
5/28/2009 10:43:48 PM